In a significant strategic shift, cryptocurrency lending firm Celsius has announced that it will reorient its core business towards Bitcoin mining, as revealed in a statement made on November 20th. The decision comes in response to feedback from the United States Securities and Exchange Commission (SEC) and in consultation with the Official Committee of Unsecured Creditors, as the company navigates the complex landscape of bankruptcy proceedings.
Restructuring plan prioritizes Bitcoin mining
Celsius initially filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York in July 2022, following a period of suspended withdrawals on its platform. Subsequently, in July 2023, the SEC filed a lawsuit against Celsius and its former CEO, Alex Mashinsky, alleging deceptive promises of safety associated with the firm’s Earn Interest Program.
This development led to the arrest of Alex Mashinsky by the U.S. Justice Department, where he faces charges related to securities fraud, commodities fraud, and wire fraud. Mashinsky is currently on $40 million bail, with his trial set for September 2024.
Under the restructuring plan initially proposed by Celsius, the company intended to transfer certain assets to an entity referred to as ‘Fahrenheit NewCo.’ However, the recent announcement indicates that Celsius will retain some of these assets within its estates. Instead, the primary focus of the ‘NewCo’ entity will be Bitcoin mining, marking a departure from its previous emphasis on staking.
The SEC’s influence and public ownership
Celsius cited the SEC’s feedback as a catalyst for this strategic shift. While specific details of the feedback were not disclosed in the announcement, it underscores the regulatory scrutiny and evolving landscape faced by cryptocurrency companies. The decision to pivot towards Bitcoin mining aligns with the evolving regulatory environment and may offer Celsius a more secure footing in the industry.
Furthermore, Celsius plans to make the ‘Mining NewCo’ entity publicly traded in the United States. Notably, this new entity will be owned by Celsius customers, potentially fostering a sense of ownership and alignment of interests among the firm’s user base.
In light of this decision, Celsius intends to file a motion with the Bankruptcy Court in the coming weeks to seek approval for modifications to the existing restructuring plan. The company expressed confidence that these changes would not necessitate a resolicitation of the plan. As a result, Celsius maintains its target timeline for the commencement of creditor distributions, aiming for January 2024.
